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Disclosure Authorization

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									NSTP Members: The Treasury Department and the Internal Revenue Service have released final regulations and a related revenue procedure giving taxpayers greater protection and control over their tax return information held by tax return preparers. The final rules update disclosure and privacy laws related to preparers for the first time in more than 30 years and bring taxpayer consent requirements into the electronic age. Preparers will have until January 1, 2009 to implement the new consent requirements, giving preparers a full year to make any necessary changes. The final rules apply to Code section 7216 and a related provision of the Code, section 6713, which provide penalties against tax return preparers who make unauthorized use or disclosure of tax return information. Regulations published in 1974 provide certain exceptions to the penalties in cases of taxpayer consent. However, the 1974 regulations did not address issues raised by electronic preparation and filing of tax returns. Currently, 57 percent of all individual taxpayers file their tax returns electronically. The final rules affirm a general rule in place for more than three decades that taxpayers, not the IRS, control their own tax return information held by preparers and, within appropriate limits and safeguards, taxpayers are able to direct preparers to disclose tax return information as taxpayers see fit. More than 60 percent of individual taxpayers use a preparer. Federal law already strictly prohibits the IRS from making disclosures of taxpayer return information within its control to third parties except with taxpayer consent or in circumstances set by Congress. The final rules have no effect on the strict protection of return information in the IRS’s hands and apply only to tax return information held by income tax return preparers. Among the new rules:  The consent must identify: 1. The intended purpose of the disclosure, 2. Identify the recipients, and 3. Describe the particular authorized disclosure or use of the information. Mandatory language informs individual taxpayers that they are not required to sign the consent; that if they sign the consent, federal law may not protect their information from further disclosure; and

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that if they sign the consent, they can set a time period for the duration of that consent. If the taxpayers fail to set a time period, the consent is valid for a maximum of one year. To prevent consent requests from individual taxpayers from being buried in fine print, the rules require the paper consent documents to be in 12-point type on 81/2 by 11 inch paper and require electronic consent requests to be in the same type as the Web site’s standard text, all to prevent consent requests from being too difficult to read for individual taxpayers. If a taxpayer declines to provide consent for an unrelated tax preparation disclosure or use request, the preparer cannot make a similar consent request. The intent is to protect taxpayers from being pressured with repeated consent requests regarding the same issue. Mandatory consent from taxpayers also is required if the tax information is going to be disclosed to a tax preparer located outside the United States. This provision is intended to ensure taxpayers are informed if their tax information is being sent offshore for return preparation. The individual taxpayer’s Social Security Number also must be redacted.

In an effort to assist the tax professionals of NSTP, the following consent sample letter is offered. We sincerely hope you will find this information helpful.

Beanna
NSTP Executive Director

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Disclosure Authorization The following disclosure authorization is made available to (name of tax professional and/or firm) in order to disclose information to secure (a home mortgage, a bank loan, a student loan, etc or to pick up tax information for delivery). I authorize you to provide the following information to (mortgage lender, bank, lender, school or university, individual or delivery service). The following information is to be included in the disclosure authorization: 1. Tax Return Form 2. Tax Return Form Other Information. This consent is effective for (period of time). ________________________________ Taxpayer’s Signature ________________________________ Taxpayer’s Signature Year Year

________________________________ Date

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Taxpayers are not required to sign this consent. If you sign the consent, federal law may not protect your information from further disclosure. If you sign the consent you can set a time period for the duration of the consent. If you fail to set a time period, the consent is valid for a maximum of one year. Example: Disclosure Authorization The following disclosure authorization is made available to Beanna J. Whitlock, EA CSA and to Whitlock Tax Service, LLC in order to disclose information to secure a home mortgage. I authorize the following information to be sent to Bank of America, San Antonio, Texas, in care of Beth Williams, loan officer. The following information is to be included in the disclosure authorization: Tax Return Form 1040 and all schedules for year 2006 and copies of the W-2’s for 2006.. This consent is effective for 30 days from the date of my signature. _________________________________ Taxpayer’s Signature _________________________________ Date Taxpayers are not required to sign this consent. If you sign the consent, federal law may not protect your information from further disclosure. If you sign the consent you can set a time period for the duration of the consent. If you fail to set a time period, the consent is valid for a maximum of one year.

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